January 26, 2012
Written by: Fred Favole
That might seem like a paranoid question, from a seasoned procurement executive, but if you take into consideration today's business environment, it doesn't seem so far off base.
Suppliers are fighting for economic survival, just like you are. However, until they stop paying off distributors with spiffs, sheltered income, and no-show food shows, restaurant and hospitality organizations will have to watch their economic backs. The practice of inflated prices with an attitude of " I can get away with packing the top layer of 5X6 tomatoes with quality product, while the rest of the case is crap, is just about over.
Distributors can improve delivery and pricing practices, too. Why do they continue to pass along their buying mistakes (100% of all price increases, charge customers based on replacement cost and not inventory value?
Will distributors continue the class pricing warfare against the independent operator and emerging chain? Why can't they get pricing right month after month? Do you think they profit by substituting products? Why is it that fresh eggs, cheese and bacon prices don't follow the market down, as quickly as they move up?
Will the distributor "in-house or in-pocket" brokers and the manufactures' representatives assigned to work with the large broad line distributors continue to keep prices higher for their smaller customers. Prove it? If you move just one level higher in the food sales chain, ask the manufacturer's regional chain sales manager or the distributor V.P. Sales, if your price is higher than the 75 unit chain purchasing the same item.
Why do distributors and manufacturers close-code products (non-private label product in inventory, but not available to you) that could save you money? Why does the industry allow distributors to pass along institutional, GPO and health care discount pricing to select non-qualified restaurant customers? When will actual -freight cost be used to determine the landed cost of goods? Exactly when will distributors start calculating selling prices for margin and case fee accounts based on true tax cost. You get the idea!
Keep in mind that not all suppliers and distributors participate in these practices. SPS would not be a successful consulting firm without the strong support of a great many honest storage & drayage companies and quality manufacturers. These folks work as hard as any operator I know.
To understand how purchasing fits into your financial profit / survival plan, and how you can move to the next higher level of performance in your buying program, , reflect on the 4 modern pillars of foodservice procurement:
1) strategic sourcing
These practices used by large-scale purchasing organizations can be successfully implemented into your buying program if you are willing to become informed and use a systematic approach to buying, along with your skills in the "art of the deal".
Fred Favole is Founder & President of Strategic Purchasing Services (SPS), a firm specializing the purchasing department outsourcing, commodity contracting and distribution program (MDA) audits. His contact information: 912.634.0030, SPS@Gate.Net Follow Fred's Blog; Purchasing Insights at https//purchasinginsights.blogspot.com